Dedicated Followers of Fintech: Why Transaction Banking Never Goes Out of Fashion
Taking part in a panel at a recent corporate treasury conference, I was introduced as a ‘consumer payments expert’ – not an obvious qualification for sharing stage-time with serious corporate liquidity and cash management folk, but as the talk track was on mobile wallets and Open Banking, I had some reasonably safe and relevant content on which to fall back.
One of my fellow speakers was the immaculately dressed treasurer from fashion house Chanel, who brought fascinating insights on the spending demands of very high-value consumers from around the world. It reminded of that age-old separation between high value (commercial) and low value (retail) payments operations.
Perhaps it is the highly mobile global consumers of luxury brands who are now helping to accelerate a convergence between commercial and retail payments, and exposing more banks to the acceptance of – once exotic – alternative payment methods.
Although the average conference attendee was not as well labelled as my elegant fashion house colleague, I was struck by how most of the (predominantly male) attendees were still so well acquainted with suits and ties. Uncharacteristically, I had anticipated and planned for some dress-code ambiguity, so I could mingle without too many raised eyebrows, wearing what I’d like to think would be described as ‘post-Fintech-2020-Actionwear,’ or what others might have simply called ‘suit and tie.’
Dress code dissonance was, however, a minor sensation compared to the wider realization that my ‘safe and relevant’ on-stage topics may not have been as well understood as I’d assumed. Attendees were certainly very polite and curious about the applicability of new concepts into the world of treasury, but it didn’t feel that Open Banking, alternative payments and APIs were commonplace in a typical treasurer’s closet.
Retail banking doesn’t own the catwalk
I started to wonder, perhaps a little unfairly, whether the buttoned-up behavior was reflective of an industry a bit reluctant to embrace changing payments fashions. And I started to question recent data that showed strong demand from corporates for improved liquidity, better credit decisions, aggregation of multi-banks accounts, visibility of real-time payment information and so on.
In conversations at the conference, most delegates were keen on the logic of new digital banking services and the benefits of real-time payments, but it still felt like there was an inertia and an assumption that change might not happen so quickly. I wondered about the possible reasons for this stasis at the point of interaction between corporates and their banks. Is there a rationale for retail banking moving very quickly to digital applications, online statements and mobile payments, whilst treasury still seems to prefer a world of paper and spreadsheets?
I realized I was being unfair. The apparently conservative uniform of treasury has little correlation with the changing complexity of corporate life. And I’m not comfortable with a view that characterizes retail banking alone as the innovative driver for digital change: A truer picture needs to show the nuanced reality of two intertwined markets, with transaction banking and retail payments requiring a shared, powerful engine room to power through the services demanded by modern treasurers.
Perhaps too many of us have assumed that the action has all been in the retail banking world. I suspect if we looked deeper into the raw numbers for adoption and transaction volumes, we may find that digital-only retail banking is still a minority sport. It may be changing at a fast pace, but for every bright pink Monzo account, there’s an awful lot of customers in the UK still clinging to their chequebook. And for all the availability of new payments infrastructure like faster payments, we haven’t exactly seen a seismic shift of consumer behaviour away from the default patterns of cards, toward inexpensive, direct-from-account push payments.
The pace of change in commercial banking appears to be even more glacial, but this superficial view overlooks the complexities of modern trade. The innovative trend-setters are looking to improve cash flow and access to credit, and to improve efficiency and profitable growth across wide and long supply chains.
Treasurers are clued up on public policy initiatives that aim to unlock capital and liquidity within global payment systems. However, businesses can be excused for prioritizing their own internal infrastructural efficiencies before turning toward potential collaborative efforts with their banking partners, and exploring new concepts like Open Banking and real-time consumer payments.
Although these trends may appear superficial, it is time to consider their serious impact on the changing fashions of banking. Ten years after the financial services disaster, it is time for banks to accelerate the rate of change and to make possibilities happen – particularly in the corporate sector.
Sure, there is still a need to help move consumer markets toward lower-cost real-time concepts, but the big prize for banks cannot be limited to a vision of new retail banking fees. A bigger prize lies in helping businesses to get closer to their markets, sharing in the improved performance of these companies, and helping businesses to interact with wider mass markets (including consumers) where real-time payments have become the norm.
This requires extra effort at the bank-corporate interface, and not inconsiderable change. And unfortunately, the concepts are not quite as snazzily understandable as retail products, such as mobile apps and wallets. But that makes the prize for successful corporate bankers even more desirable, because mastering the complexity whilst being able to curate uniquely customized solutions for businesses will give them a competitive silhouette, which is not only noticeable but memorable too.
Time for banks to embrace new fashions
Back at the conference, my Chanel colleague showed a lovely video about the concept of “Baudruchage” (it’s always great to come back from conferences with at least one extra bit of vocabulary). It’s the process used to seal perfume bottles, which still requires manual effort, wax and string. It’s probably not the most efficient way to guarantee quality, tamper-proof authenticity, but in a world of ever important ‘personalization,’ it’s a vital part of Chanel’s overall brand, service and product.
As Coco Chanel once said, “in order to be irreplaceable, one must be different.” She may have been referring to clothing, but her sentiments resonate with today’s need for banks to embrace the new real-time fashions and to support new customized services.
It’s time for more corporate banks to gear up for the banking equivalent of this modern service curation, helping more businesses to make their own possibilities happen. It’s also time for more treasurers to loosen those ties, roll-up those sleeves and ask more of their banking suppliers – financial services that span corporate and retail payments.
Change and unpredictability are fashionable aspects of payments, but it’s important that the basics of quality, reliability and availability are retained as the foundations for the new style of corporate banking, doing justice to the famous Yves Saint Laurent quote: “Fashions fade, style is eternal.”
The pan-European scheme question is not just about a new payment type, but about a new business environment. That environment is increasingly global for both the bank and its customers. When considering any real-time payments decision, banks must be confident that every step along that journey is with long-term strategy in mind; any pan-European implementation must easily scale to expanding volumes and integrate with global cross-border payments schemes, providing the quality and reach of service that customers expect.
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